Payment reform, accountable care, and risk: early lessons for providers

Several organizations have begun to design and even implement accountable care organization (ACO), payment reform, and risk sharing pilots. Here are some early lessons: Providers should not design and implement ACOs, payment pilots, and risk models in a vacuum. Providers should tackle five core decision areas that underlie all ACOs, payment pilots, and risk arrangements. Providers should invest in analytics to inform tactical and strategic decisions simultaneously. Successful organizations implement pilot programs before going into full production mode.

[Long-term care insurance in taiwan: theory and challenges]

Long-term care insurance, now being intensively discussed as part of the formal governmental agenda, is widely expected to be inaugurated by 2011. As all entitled citizens will be enrolled compulsorily in accordance with social insurance rules, tight scrutiny in the planning process is strongly advised. Equity of financial mechanisms and the efficiency of the delivery system for long-term care should also be carefully considered and maximized. This study explores major empirical suggestions for Taiwan's long-term care insurance scheme from a primarily theoretical point of view. The three relevant issues deliberated in this paper include risk sharing and financial equity in long-term care insurance and long-term care system delivery efficiency. Content focuses on concepts that may be easily misunderstood or misinterpreted by medical professionals.

[Development and implementation of integrated health care in pain medicine : the nationwide German headache treatment network]

Integrated care builds interdisciplinary networks across the different healthcare sectors. A conjoint effort toward clearly defined treatment goals is crucial for medically effective and economically efficient care. Allowing creativity in the implementation of integrated care triggers competition for more effective ideas and better solutions. Based on a summary of the development of integrated care and the example of the nationwide German headache treatment network, the successful organization and implementation of this cross-sectoral care within pain medicine is illustrated. An interdisciplinary nationwide network of pain therapists working hand in hand across the sectors, both in the outpatient and inpatient setting, and employing modern treatment regimens results in optimal pain relief. The treatment quality is assessed by continuous accompanying research and sustainable cost efficiency in all sectors of healthcare is confirmed through analysis of both direct and indirect costs. The project was started in May 2007. In the meantime, almost all large statutory health insurance providers in Germany have joined this healthcare project. The large treatment network confirms the significant clinical and economic efficiency of pain medicine. It demonstrates that coordinated modern therapy effectively relieves pain, lowers costs sustainably, and reduces sick leave. Patient satisfaction is very high. The healthcare providers may directly participate in treatment success through risk-sharing.

Can't get no satisfaction? Will pay for performance help?: toward an economic framework for understanding performance-based risk-sharing agreements for innovative medical products

This article examines performance-based risk-sharing agreements for pharmaceuticals from a theoretical economic perspective. We position these agreements as a form of coverage with evidence development. New performance-based risk sharing could produce a more efficient market equilibrium, achieved by adjustment of the price post-launch to reflect outcomes combined with a new approach to the post-launch costs of evidence collection. For this to happen, the party best able to manage or to bear specific risks must do so. Willingness to bear risk will depend not only on ability to manage it, but on the degree of risk aversion. We identify three related frameworks that provide relevant insights: value of information, real option theory and money-back guarantees. We identify four categories of risk sharing: budget impact, price discounting, outcomes uncertainty and subgroup uncertainty. We conclude that a value of information/real option framework is likely to be the most helpful approach for understanding the costs and benefits of risk sharing. There are a number of factors that are likely to be crucial in determining if performance-based or risk-sharing agreements are efficient and likely to become more important in the future: (i) the cost and practicality of post-launch evidence collection relative to pre-launch; (ii) the feasibility of coverage with evidence development without a pre-agreed contract as to how the evidence will be used to adjust price, revenues or use, in which uncertainty around the pay-off to additional research will reduce the incentive for the manufacturer to collect the information; (iii) the difficulty of writing and policing risk-sharing agreements; (iv) the degree of risk aversion (and therefore opportunity to trade) on the part of payers and manufacturers; and (v) the extent of transferability of data from one country setting to another to support coverage with evidence development in a risk-sharing framework. There is no doubt that--in principle--risk sharing can provide manufacturers and payers additional real options that increase overall efficiency. Given the lack of empirical evidence on the success of schemes already agreed and on the issues we set out above, it is too early to tell if the recent surge of interest in these arrangements is likely to be a trend or only a fad.

To wait or to pay for medical treatment? Restraining ex-post moral hazard in health insurance

We explore the hierarchy of two instruments, waiting time and coinsurance for medical treatment, for optimally solving the tradeoff between the economic gains from risk sharing and the losses from moral hazard. We show that the optimal waiting time is zero, given that the coinsurance rate is optimally set.

Beyond fragmentation and towards universal coverage: insights from Ghana, South Africa and the United Republic of Tanzania

The World Health Assembly of 2005 called for all health systems to move towards universal coverage, defined as " access to adequate health care for all at an affordable price" . A crucial aspect in achieving universal coverage is the extent to which there are income and risk cross-subsidies in health systems. Yet this aspect appears to be ignored in many of the policy prescriptions directed at low- and middle-income countries, often resulting in high degrees of health system fragmentation. The aim of this paper is to explore the extent of fragmentation within the health systems of three African countries (Ghana, South Africa and the United Republic of Tanzania). Using a framework for analysing health-care financing in terms of its key functions, we describe how fragmentation has developed, how each country has attempted to address the arising equity challenges and what remains to be done to promote universal coverage. The analysis suggests that South Africa has made the least progress in addressing fragmentation, while Ghana appears to be pursuing a universal coverage policy in a more coherent way. To achieve universal coverage, health systems must reduce their reliance on out-of-pocket payments, maximize the size of risk pools, and resource allocation mechanisms must be put in place to either equalize risks between individual insurance schemes or equitably allocate general tax (and donor) funds. Ultimately, there needs to be greater integration of financing mechanisms to promote universal cover with strong income and risk cross-subsidies in the overall health system.

Optimal quality, waits and charges in health insurance

We examine the role of quality and waiting time in health insurance when there is ex post moral hazard. Quality and waiting time provide additional instruments to control demand and potentially can improve the trade-off between optimal risk bearing and optimal consumption of health care. We show that optimal quality is lower than it would be in the absence of ex post moral hazard. But it is never optimal to have a positive waiting time if the marginal cost of waiting is higher for patients with greater benefits from health care.

Arrangement with teeth

* Buildings at Bristol's school of dentistry needed modernising. * A "decant, refurbish, move in" cycle was chosen. * It was completed on time and within budget.

Risk equalization and voluntary deductibles: a complex interaction

The presence of voluntary deductibles in the Swiss and Dutch mandatory health insurance has important implications for the respective risk equalization systems. In a theoretical analysis, we discuss the consequences of equalizing three types of expenditures: the net claims that are reimbursed by the insurer, the out-of-pocket expenditures and the expenditure savings due to moral hazard reduction. Equalizing only the net claims, as done in Switzerland, creates incentives for cream skimming and prevents insurers from incorporating out-of-pocket expenditures and moral hazard reductions into their premium structure. In an empirical analysis, we examine the effect of self-selection and conclude that the Swiss and Dutch risk equalization systems do not fully adjust for differences in health status between those who choose a deductible and those who do not. We discuss how this may lead to incentives for cream skimming and to a reduction of cross-subsidies from healthy to unhealthy individuals compared to a situation without voluntary deductibles.

Pharmaceutical risk-sharing agreements

Increased spending on pharmaceuticals continues to foster debate over healthcare policy. The increasing costs of bringing products to the market, as well as increased utilization of pharmaceuticals contribute to increased pharmaceutical expenditure; however, appropriate pharmaceutical use can, in certain cases, reduce overall healthcare costs. Nevertheless, the perception of high drug prices still puts pressure on pharmaceutical companies to build confidence in the proposition that their products are worth the additional expense. One potential approach to building this confidence, and maintaining investment incentives, is for the pharmaceutical company to share the risk of a situation in which there is uncertainty about whether the product is effective for the consumer and payer. Such risk-sharing arrangements for pharmaceuticals, like warranties, can be used to signal high quality when product quality is not fully observable. While there may be difficulties in devising such schemes for every product, such risk-sharing plans may become a staple feature of the market in the future.

The pharmaceutical industry at risk: how excessive government regulation stifles innovation

In the fall of 2006, I published a book, Overdose: How Excessive Government Regulation Stifles Pharmaceutical Innovation. The book goes against the conventional wisdom found in the academic and popular literature on the topic by offering a more sympathetic view of the pharmaceutical industry.

Liability, insurance and medical practice

We test for effects of tort liability on the use of certain diagnostic procedures, where the health care providers' expected cost of litigation is proxied by the risk-sharing arrangements agreed with their insurers. 2SLS and GMM estimators are adopted to test for possible endogeneity of these risk-sharing arrangements. Our findings are consistent with the exercise of liability-induced discretion by hospitals, especially regarding use of costly diagnostic imaging procedures. Hospitals facing higher expected costs per claim as a consequence of higher deductibles used these tests more frequently, after controlling for activity levels and casemix. These results are consistent with hospitals reacting to the incentives provided by a clinical negligence compensation system.